Sunil Poddar
& Ors. Vs. Union Bank of India [2008] Insc
24 (8 January 2008)
C.K.
Thakker & Altamas Kabir
(Arising
out of SLP (c) No. 3935 of 2006) C.K. Thakker, J.
1.
Leave granted.
2. The
present appeal is directed against the order dated November 23, 2005 passed by the High Court of Judicature at Allahabad in Civil Miscellaneous Writ
Petition No. 67297 of 2005. By the said order, the High Court dismissed the
writ petition filed by the appellant-writ petitioners and confirmed the order
of Debt Recovery Appellate Tribunal, Allahabad dated September 13, 2005 which
in turn affirmed the order passed by the Debt Recovery Tribunal, Jabalpur on
December 20, 2001.
3. To
appreciate the controversy raised in the present appeal, few relevant facts may
be stated. It is the case of the appellant that Adhunik Detergent Ltd.
(Defendant No. 1 in Suit No. 44A of 1993 instituted by respondent-Union Bank of
India) was incorporated as Company under the Indian Companies Act, 1956. There
was another Company also known as Adhunik Synthetics Ltd.
which
was floated by the Directors of Adhunik Detergent Ltd. According to the
appellants, initially, Adhunik Detergent Ltd. had seven Directors, namely,
(1) Satyanarayan
Jalan,
(2) Krishna Jalan,
(3) Chakrapani
Jalan,
(4)
K.K. Jalan,
(5)Sunil
Poddar,
(6) Sushil
Kumar Kanodia and
(7) Radhey
Shyam Poddar.
Adhunik
Detergent Ltd. had taken loan from the respondent-Bank. The appellants herein
as Directors of Adhunik Detergent Ltd. at the relevant time became guarantors
for repayment of loan and executed certain documents in favour of the
respondent-Bank. It is the say of the appellants that there was division of
business among the Directors of Adhunik Detergent Ltd. and Adhunik Synthetics
Ltd. Consequent upon the division, the appellants herein, who were Directors 5,
6 and 7 had resigned as Directors from Adhunik Detergent Ltd. on August 18,
1989 and they got exclusive control over Adhunik Synthetics Ltd.
From
that date onwards, the appellants no more remained as Directors of Adhunik
Detergent Ltd.
4. It
was alleged by the respondent-Bank that since Adhunik Detergent Ltd. did not
repay the loan amount, a civil suit came to be filed by the Bank in the Court
of District Judge, Raipur, Madhya Pradesh for recovery of Rs.
1,07,17,177.60 p. In the said suit, over and above the Company, all the
Directors were also joined as defendants. A prayer was made in the plaint to
hold all the defendants jointly and severely liable to pay the amount claimed
by the plaintiff-Bank along with interest, costs and other expenses. Summonses
were issued by the Court and the defendants appeared. So far as the present
appellants are concerned, they were not served with the summonses but when they
came to know about the filing of the suit, they appeared and filed written
statement on March 9, 1995 contending inter alia that they had resigned from
the Directorship of the Company (Adhunik Detergent Ltd.) with effect from
August 18, 1989 and the Bank was intimated about such resignation. It was,
therefore, contended that they were not responsible for repayment of loan
amount and suit against them was not maintainable. The appellants, therefore,
prayed that they may be deleted from the array of parties. On March 14, 1995, the appellants also filed an
application by raising preliminary objection as to maintainability of civil
suit against them. It was stated in the said application that preliminary
objections were raised in the written statement by the appellants (defendant
Nos. 7, 8 and 9) that no suit against them would lie. It was stated that the
preliminary objection raised by them was fundamental in nature and went to very
root of the jurisdiction of the Court. It was, therefore, prayed that an issue
as to maintainability of suit against defendant Nos. 7 to 9 be framed and
decided as preliminary issue before trying the suit on merits.
Another
application was also made in November, 1995 raising a similar objection
contending that the suit was not instituted in accordance with law. The plaint
which was filed was not signed by a person authorized to do so and on that
count also, the suit was not tenable. It was further stated that suit against
defendant Nos. 7 to 9 was not maintainable. A prayer was made to frame two
issues under Order XIV, Rule 1 of the Code of Civil Procedure, 1908
(Code for short) as preliminary issues and to decide them as such.
5. It
may, however, be stated that during the pendency of the suit before the Civil
Court, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993
(hereinafter referred to as the Act) came into force and in 1998 the
suit filed by the respondent-Bank came to be transferred to the Debt Recovery
Tribunal, Jabalpur (DRT for short). The appellants had no knowledge
about the transfer of the suit to DRT nor summonses were issued by DRT to the
appellants at the new address.
In the
circumstances, nobody appeared before the DRT and the DRT vide its ex parte
judgment and order dated December 15, 2000 decreed the suit filed by the
plaintiff-Bank holding that the Bank was entitled to recover 1,07,17,177/- with
interest and cost from the defendant Nos. 1-9 jointly and severely. The
defendants were also restrained from transferring, alienating or otherwise
dealing with or disposing off the hypothecated/mortgaged properties without the
prior permission of DRT.
6. It
is asserted by the appellants that they were not aware of the proceedings
before the DRT and no summonses were served upon them. In the circumstances,
they could not remain present before the DRT. It was on December 16, 2000 when
Mr. G. Karmakar, who was working for the appellants, happened to visit the
office of M.P. Audyogik Vikas Nigam Ltd. at Bhopal for some official work that
the officials of the Nigam informed him that a suit pending in the Civil Court,
Raipur was transferred to DRT, Jabalpur and an ex-parte decree had been passed
against the appellants.
Immediately
on December 18, 2000, Mr. Karmakar went to DRT, Jabalpur for getting requisite information
and came to know that notice was sent to the appellants at the old address
though new address was available. An advertisement was also published in a
Hindi daily. He also came to know that since nobody appeared on behalf of the
appellants, ex-parte decree had been passed. In the circumstances, the appellants
herein made an application under Section 22(2)(g) of the Act on January 10, 2001 for setting aside an ex-parte order
passed by the DRT. The DRT, however, on December 20, 2001 dismissed the application.
The
appellants appealed against the order passed by the DRT, but the Debt Recovery
Appellate Tribunal, Allahabad (DRAT for short) also
dismissed the appeal. A writ petition filed against the order of DRAT also met
with the same fate. The High Court dismissed the writ petition. All these
orders have been challenged by the appellants in the present appeal.
7.
Notice was issued by this Court on March 6, 2006. After hearing the parties,
execution proceedings were stayed and the matter was ordered to be posted for
final hearing. That is how the matter has been placed before us.
8. We
have heard the learned counsel for the parties.
9. The
learned counsel for the appellants contended that DRT committed grave error of
law and jurisdiction in proceeding with the application and deciding it on
merits ex-parte in absence of the appellants. It was submitted that no
summonses were served upon the appellants and thus no opportunity of hearing
was afforded to them before passing the impugned order which is liable to be
set aside. The DRT in the circumstances, ought to have allowed the application
for setting aside ex-parte order. By not doing so, the DRT had committed grave
error and the said order deserves to be quashed. It was also submitted that
appellants were not informed about the transfer of case from Civil Court to DRT and no summonses were served
upon them. According to the appellants, they had changed their address and new
address was available with the Bank. In spite of that, with mala fide intention
and oblique motive, summonses were sought to be served upon appellants at an
old address but the appellants were not served because of change of address.
Summonses were then published in a Hindi newspaper which had no wide
circulation. That action was also taken with a view to deprive the
appellants from knowing about the proceedings before the DRT so that they may
not be able to appear and defend themselves and the Bank would be able to
obtain ex parte order. The appellants had led the evidence in support of their
say that they were not in Mumbai at the relevant time and they were not
subscribers of Hindi newspaper Navbharat Times. They had produced
necessary particulars and yet the DRT failed to consider the said evidence in
its proper perspective and dismissed the application observing that the
appellants must be deemed to be aware of the proceedings. According to the DRT,
the appellants appeared in Civil Court,
filed written statement but all those facts were suppressed by them while
filing the application before the DRT for setting aside ex parte order. The
same mistake has been repeated by the Appellate Tribunal as also by the High
Court. It was submitted that all those facts were not relevant in the present
proceedings. On all these grounds, the orders are liable to set aside by
directing the Debt Recovery Tribunal, Jabalpur to consider the matter afresh and to decide it in accordance with law.
10.
The learned counsel for the respondent-Bank, on the other hand, supported the
order passed by the DRT, confirmed by the DRAT as well as by the High Court. An
affidavit-in-reply is filed by Senior Manager (Law) of the respondent-Bank,
wherein it was submitted that the appellants were aware of the proceedings
initiated by the Bank against them. In civil suit, the appellants were joined
as defendant Nos. 7-9. They appeared before the Court through an advocate and
filed written statement in March, 1995. They also raised preliminary objections
by filing applications, requesting the Court to treat the issues as to
maintainability of suit and liability of the appellants as preliminary issues.
It was, therefore, clear that they were served with the summonses and were in
know of the proceedings. It was thereafter their duty to take care of their
interest, when the suit was transferred to DRT, Jabalpur. It was further stated that summonses were issued to the
appellants at the addresses at which they were earlier served. In fact,
according to the respondent-Bank, it was the same address which was given by
the appellants themselves before both the Tribunals and before the High Court.
But with a view to deprive the Bank of the legitimate dues and to delay the
proceedings initiated against them, they did not appear before the DRT. Though
it was not necessary for the Bank to serve the appellants once again, they made
a prayer to the Bank to get the summonses published in a newspaper which was
done and in Navbharat Times, Bombay as well as Navbharat Times, Raipur summonses were published. Navbharat Times is
having very wide circulation at both the places, i.e. Bombay as well as at Raipur.
It
was, therefore, not open to the appellants to contend that they were not
subscribing and/or reading a Hindi newspaper by producing a bill from a
newspaper agent. Such a bill can be obtained from any vendor. No reliance can
be placed on such evidence. Moreover, an extremely important fact which weighed
with both the Tribunals as well as with the High Court was that in an
application under Section 22(2)(g) of the Act for setting aside ex parte order
passed by DRT, the appellants have suppressed material and extremely important
fact that they had appeared before the Civil Court and had filed written
statement. The application proceeded on the footing as if the appellants were
never aware of any proceedings initiated against them by the plaintiff-Bank.
The
DRT was, therefore, wholly right in dismissing the application and the said
order was correctly confirmed by the DRAT and by the High Court. No case can be
said to have been made out by the appellants to interfere with those orders and
the appeal deserves to be dismissed.
11.
Having heard the learned counsel for the parties, in our opinion, the
appellants have not made out any ground on the basis of which the order passed
by the DRT, confirmed by the DRAT and by the High Court can be set aside. From
the record, it is clearly established that the suit was instituted by the
plaintiff-Bank as early as in August, 1993. The appellants who were defendant
Nos.
7 to 9
were aware of the proceedings before the Civil Court. They appeared before the Court, engaged an advocate and
filed a written statement. They raised preliminary objections as also
objections on merits. They filed applications requesting the Court to raise
certain issues and try them as preliminary issues. It was, therefore,
obligatory on their part to appear before the DRT, Jabalpur when the matter was transferred
under the Act.
The
appellants, however, failed to do so. We are not impressed by the argument of
the learned counsel for the appellants that they were not aware of the
proceedings before the DRT and summonses could not be said to have been duly
served. As is clear, summonses were issued earlier and on the same address,
summonses were sought to be served again after the case was transferred to DRT.
There is substance in the submission of the learned counsel for the
respondent-Bank that the appellants had avoided service of summons as they
wanted to delay the proceedings. We are also inclined to uphold the argument of
learned counsel for the Bank that in view of the fact that the appellants were
appearing before the Civil
Court, it was not
necessary for the Bank to get summonses published in a newspaper after the
matter was transferred in accordance with law to the DRT, Jabalpur. But even that step was taken by
the respondent- Bank. In Navbharat Times, a Hindi newspaper having
wide circulation in Bombay and Raipur, summonses were published. It cannot be argued successfully
that the appellants were not the subscribers of the said newspaper and were not
reading Navbharat Times Hindi Edition. But even otherwise, such
contention is wholly irrelevant. As to bills said to have been produced from
the newspaper agent, to us, both the Tribunals were right in observing that
such a bill can be obtained at any time and no implicit reliance can be placed
on that evidence. It is immaterial whether appellants were subscribers of the
said newspaper and whether they were reading it. Once a summons is published in
a newspaper having wide circulation in the locality, it does not lie in the
mouth of the person sought to be served that he was not aware of such
publication as he was not reading the said newspaper. That ground also,
therefore, does not impress us and was rightly rejected by the Tribunals.
12.
While dealing with the contention raised by the appellants, the DRT observed;
When
summons are published in newspaper, the Court has to be cautious that it is
published in a newspaper, circulated and widely read in an area where the
defendant stays.
Navbharat
Times is a national newspaper read not only in Mumbai but also elsewhere in
this country. The summons were published also in a newspaper circulated in Raipur from where the loan was disbursed.
As stated in the main order, the Court is satisfied that summons were properly
published and summons has been properly served.
13.
But the fundamental objection which had been raised by the respondent-Bank and
upheld by the Tribunals is legally well- founded. In the application filed by
the appellants before the DRT, Jabalpur under Section 22(2)(g) of the Act,
there is no murmur that the applicants were defendants in the suit instituted
in Civil Court; they were served and they appeared through an advocate and also
filed a written statement and other applications requesting the Court to try
certain issues as preliminary issues. It was expected of the appellants to
disclose all those facts. Apart from suppression of fact as to service of
summons and appearance of defendants before the Court, even on legal ground, it
was not obligatory that the appellants should have been served once again.
14. In
this connection, we may refer to the provisions of Section 22 of the Act which
lays down procedure to be followed by the Tribunals. The relevant part of the
said section reads thus;
22.
Procedure and powers of the Tribunal and the Appellate Tribunal.
(1)
The Tribunal and the Appellate Tribunal shall not be bound by the procedure
laid down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided
by the principles of natural justice and, subject to the other provisions of
this Act and of any rules, the Tribunal and the Appellate Tribunal shall have
powers to regulate their own procedure including the places at which they shall
have their sittings.
(2)
The Tribunal and the Appellate Tribunal shall have, for the purposes of
discharging their functions under this Act, the same powers as are vested in a
civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a
suit, in respect of the following matters, namely:-
(a) summoning
and enforcing the attendance of any person and examining him on oath;
(b) requiring
the discovery and production of documents;
(c) receiving
evidence on affidavits;
(d) issuing
commissions for the examination of witnesses or documents;
(e) reviewing
its decisions;
(f) dismissing
an application for default or deciding it ex parte;
(g) setting
aside any order of dismissal of any application for default or any order passed
by it ex parte;
(h)
15.
Bare reading of the above provision makes it clear that the DRT and the DRAT
have, for the purpose of discharging their functions under the Act, the same
powers as are vested in Civil Court under the Code of Civil Procedure, 1908.
Clause (g) of sub- section (2) of Section 22, therefore, has to be read with
Rule 13 of Order IX of the Code which provides for setting aside ex parte
decree passed against a defendant. Rule 13 of Order IX as originally enacted in
the Code of 1908 read thus;
13.
Setting aside decree ex parte against defendant.In any case in which a decree
is passed ex parte against a defendant, he may apply to the Court by which the
decree was passed for an order to set it aside; and if he satisfies the Court
that the summons was not duly served, or that he was prevented by any
sufficient cause from appearing when the suit was called on for hearing, the
Court shall make an order setting aside the decree as against him upon such
terms as to costs, payment into Court or otherwise as it thinks fit, and shall
appoint a day for proceeding with the suit:
Provided
that where the decree is of such a nature that it cannot be set aside as
against such defendant only it may be set aside as against all or any of the
other defendants also.
16.
Original Rule 13 of Order IX of the Code thus provided that when a decree had
been passed ex parte against the defendant who satisfied the Court that summons
was not duly served upon him, the Court was bound to set aside the decree. It
was immaterial whether the defendant had knowledge about the pendency of suit
or whether he was aware as to the date of hearing and yet did not appear before
the Court. The Law Commission considered that aspect and the expression
duly served. In its Twenty-seventh Report, the Commission stated;
1.
Under Order IX, rule 13, if the court is satisfied either that the summons has
not been served, or that the defendant was prevented by sufficient cause from
appearing, etc., the ex parte decree should be set aside. The two branches of
the rule are distinctive and the defendant, whatever his position may be in
respect of one branch, is the court that he has made good his contention in
respect of the other branch.
2.
Now, cases may arise where there has been a technical breach of the
requirements of due service, though the defendant was aware of the institution
of the suit. It may well be, that the defendant had knowledge of the suit in
due time before the date fixed for hearing, and yet, apparently he would
succeed if there is a technical flaw. This situation can arise e.g., where the
acknowledgement on the duplicate of the summons has not been signed. There may
be small defects in relation to affixation, etc., under Order V, rule
15. At
present, the requirements of the rules regarding service must be strictly
complied with, and actual knowledge (of the defendant) is immaterial. (There
are not many decisions which hold that even where there has not been due
service, yet the decree can be maintained, if the defendant knew the date of
hearing.)
3.
Where a literal conformity with the C.P.C. is wanting, the second part of
column third of article 164, Indian Limitation Act, 1908 (now article 123,
Limitation Act, 1963) applies. As to substituted service, see discussion in
under-mentioned decision.
4. The
matter was considered exhaustively by the Civil Justice Committee, which
recommended a provision that a decree should not be set aside for mere
irregularity. Local Amendments made by several High Courts (including Allahabad,
Kerala, Madhya Pradesh, Madras and Orissa) have made a provision on the
subject, though there are slight variations in the language adopted by each.
Such a provision appears to be useful one, and has been adopted on the lines of
the Madras Amendment.
17.
The Commission again considered the question and in its Fifty-fourth Report,
reiterated;
9.12.
Under Order 9, rule 13, if the court is satisfied either that the summons has
not been served, or that the defendant was prevented by sufficient cause from
appearing, etc., the ex parte decree should be set aside. The two branches of
the rule are distinctive, and the defendant, whatever his position may be in
respect of one branch, is entitled to benefit of the other branch, if he
satisfies the court that he has made good his contention in respect of the
other branch.
9.13.
In the earlier Report, several points were considered with reference to this
rule, and amendments suggested on one point,-the broad object being to ensure
that a decree shall not be set aside merely on the ground of irregularity in
service, if the defendant had knowledge of the decree.
After
consideration of the points discussed in the earlier Report, we have reached
the same conclusion.
18.
Accepting the recommendations of the Law Commission, the rule was amended by
the Code of Civil Procedure (Amendment) Act, 1976.
Rule 13
of Order IX with effect from February 1, 1977 now reads thus;
13.
Setting aside decree ex parte against defendantIn any case in which a decree is
passed ex parte against a defendant, he may apply to the Court by which the
decree was passed for an order to set it aside; and if he satisfies the Court
that the summons was not duly served, or that he was prevented by any
sufficient cause from appearing when the suit was called on for hearing, the
Court shall make an order setting aside the decree as against him upon such
terms as to costs, payment into Court or otherwise as it thinks fit, and shall
appoint a day for proceeding with the suit;
Provided
that where the decree is of such a nature that it cannot be set aside as
against such defendant only it may be set aside as against all or any of the
other defendants also:
Provided
further that no Court shall set aside a decree passed ex parte merely on the
ground that there has been an irregularity in the service of summons, if it is
satisfied that the defendant had notice of the date of hearing and had
sufficient time to appear and answer the plaintiffs claim.
Explanation.-Where
there has been an appeal against a decree passed ex- parte under this rule, and
the appeal has been disposed of on any ground other than the ground that the
appellant has withdrawn the appeal, no application shall lie under this rule
for setting aside that ex parte decree. (emphasis supplied)
19. It
is, therefore, clear that the legal position under the amended Code is not
whether the defendant was actually served with the summons in accordance with
the procedure laid down and in the manner prescribed in Order V of the Code,
but whether
(i) he
had notice of the date of hearing of the suit; and
(ii) whether
he had sufficient time to appear and answer the claim of the plaintiff.
Once
these two conditions are satisfied, an ex parte decree cannot be set aside even
if it is established that there was irregularity in service of summons. If the
Court is convinced that the defendant had otherwise knowledge of the
proceedings and he could have appeared and answered the plaintiffs claim,
he cannot put forward a ground of non service of summons for setting aside ex parte
decree passed against him by invoking Rule 13 of Order IX of the Code. Since
the said provision applies to Debt Recovery Tribunals and Appellate Tribunals
under the Act in view of Section 22(2)(g) of the Act, both the Tribunals were
right in observing that the ground raised by the appellants could not be
upheld. It is not even contended by the appellants that though they had
knowledge of the proceedings before the DRT, they had no sufficient time to
appear and answer the claim of the plaintiff-bank and on that ground, ex parte
order deserves to be set aside.
20. In
our opinion, the Tribunals were also right in commenting on the conduct of the
appellants/defendants that they were appearing before Civil Court through an
advocate, had filed written statement as also applications requesting the Court
to treat and try certain issues as preliminary issues. All those facts were
material facts. It was, therefore, incumbent upon the appellants to disclose
such facts in an application under Section 22(2)(g) of the Act when they
requested the DRT to set aside ex parte order passed against them. The
appellants deliberately and intentionally concealed those facts. There was no
whisper in the said application indicating that before the Civil Court they
were present and were also represented by an advocate. An impression was sought
to be created by the defendants/appellants as if for the first time they came
to know in December, 2000 that an ex parte order had been passed against them
and immediately thereafter they had approached the DRT. The Debt Recovery
Tribunal, Jabalpur, therefore, in our opinion was right in dismissing the said
application. In an appeal against the said order, the DRAT observed that the
appellants had willfully suppressed the fact that they were not in the
know of the proceedings when the same was proceeding in the Civil Court.
The DRAT correctly stated that even if it is taken to be true that the
appellants did not receive notice from the DRT, it was their duty to make
necessary inquiry in the proceedings when the case had been transferred to the
DRT. The Appellate Tribunal rightly concluded;
In
the present case, the appellants very artistically have suppressed the fact of
their filing of written statement in the case while it was proceeding in the
Civil Court and were being represented by their lawyer till the date of its
transfer to the Tribunal at Jabalpur.
21.
The High Court, in our judgment, was equally right in dismissing the petition
confirming the finding of the DRAT that the appellant had
artistically suppressed material fact and no interference was called
for.
22.
Finally, we are exercising discretionary and equitable jurisdiction under
Article 136 of the Constitution. From the facts and circumstances of the case
in their entirety, we do not feel that there is miscarriage of justice. On the
contrary, we are convinced that the appellants had not come forward with clean
hands. They wanted to delay the proceedings. Though they were aware of the
proceedings pending against them, had appeared before the Civil Court, but then
did not care to inquire into the matter. Even after ex-parte order was passed,
in an application for setting aside the order, they had not candidly disclosed
all the facts that they were aware of such proceedings and were represented by
a counsel. In the light of all these facts and keeping in view the provisions
of Section 22 (2)(g) of the Act read with Rule 13 of Order IX of the Code, if
the Debt Recovery Tribunal dismissed the application and the said order was
confirmed by the Debt Recovery Appellate Tribunal and by the High Court, it
cannot be held that those orders were wrong and ex parte order should be
quashed. The prayer of the appellants, therefore, has no substance and cannot
be accepted.
23.
For the foregoing reasons, the appeal deserves to be dismissed and is
accordingly dismissed with costs.
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